What changed in this filing

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Item 1A. Risk Factors

2023-05-11 compared with 2022-11-09 · 148 added, 97 removed, 1443 unchanged (15% of the section changed)

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We have organized the description of these risks into groupings in an effort to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be attributed to the groupings or order below.

On March 9, 2021, NantKwest, Inc.

completed the Merger with NantCell, Inc.

(formerly known as ImmunityBio, Inc., a private company) (NantCell).

After the completion of the Merger, we (formerly known as NantKwest, Inc.) changed our name to ImmunityBio, Inc., and references below to “the company,” “the combined company,” “we,” “us,” and “our” refer to ImmunityBio, Inc.

and its subsidiaries.

Risk Factor Summary

Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements

• We will need additional financing to fund our operations and complete the development and commercialization of our various product candidates, and if we are unable to obtain such financing when needed, or on acceptable terms, we may be unable to complete the development and commercialization of our product candidates.

• We anticipate needing additional financing to fund our operations and complete the development and commercialization of our various product candidates, and if we are unable to obtain such financing when needed, or on acceptable terms, we may be unable to complete the development and commercialization of our product candidates.

• Our debt could adversely affect our cash flows and limit our flexibility to raise additional capital.

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• The accounting method for convertible debt securities could have a material effect on our reported financial results.

• The value of our warrants outstanding is subject to potentially material increases and decreases based on fluctuations in the price of our common stock, which may affect our results of operations and financial position and could adversely affect our stock price.

• We are a clinical-stage biotechnology company with a limited operating history and no products approved for commercial sale.

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Risks Related to Our Common Stock and CVRs

Patrick Soon-Shiong, our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, has significant interests in other companies which may conflict with our interests.

Soon-Shiong, our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, has significant interests in other companies which may conflict with our interests.

Soon-Shiong, through his voting control of the company, has the ability to control actions that require stockholder approval.

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Our operations have consumed substantial amounts of cash since inception.

A significant portion of our funding had been in the form of promissory notes totaling $740.7 million in indebtedness (consisting of related-party promissory notes and accrued and unpaid interest) as of September 30, 2022 held by entities affiliated with Dr.

As of September 30, 2022, we held cash, cash equivalents and marketable securities totaling $111.9 million.

A significant portion of our funding had been in the form of promissory notes totaling $769.9 million in indebtedness (consisting of related-party promissory notes and accrued and unpaid interest) as of March 31, 2023 held by entities affiliated with Dr.

As of March 31, 2023, we held cash, cash equivalents and marketable securities totaling $92.1 million.

We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our product candidates.

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However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all.

To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt, or through the ATM or other offerings, or if any of our current debt is converted into equity, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

To the extent that we raise additional capital through the sale of equity or equity-linked securities (including warrants) convertible debt, or through the ATM, the shelf registration statement or other offerings, or if any of our current debt is converted into equity, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

The incurrence of additional indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

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We have a significant amount of debt and may need to incur additional debt to support our growth.

As of September 30, 2022, our indebtedness totals $740.7 million, (consisting of related-party promissory notes and accrued and unpaid interest), held by entities affiliated with Dr.

As of March 31, 2023, our indebtedness totals $769.9 million, (consisting of related-party promissory notes and accrued and unpaid interest), held by entities affiliated with Dr.

Our substantial amount of debt could have important consequences and could:

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Conversion of certain related-party notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

As of September 30, 2022, the company currently has promissory notes totaling an aggregate of $740.7 million, (consisting of related-party promissory notes and accrued and unpaid interest) held by entities affiliated with Dr.

Soon-Shiong, some of which are convertible under certain circumstances, including, in part, a $300.0 million promissory note that becomes due and payable on December 31, 2023, and outstanding fixed-rate promissory notes in an aggregate amount of $315.7 million (consisting of principal and accrued and unpaid interest) that become due and payable on September 30, 2025.

As of March 31, 2023, the company currently has promissory notes totaling an aggregate of $769.9 million, (consisting of related-party promissory notes and accrued and unpaid interest) held by entities affiliated with Dr.

Soon-Shiong (some of which are convertible under certain circumstances), including variable-rate promissory notes in an aggregate amount of $505.0 million that become due and payable on December 31, 2023, and fixed-rate promissory notes in an aggregate amount of $264.9 million (consisting of principal and accrued and unpaid interest) that become due and payable on September 30, 2025.

In the event of a default on the $300.0 million loan (as defined in the promissory note), including if the company does not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount of accrued and unpaid interest due under this note into shares of the company’s common stock at a price of $5.67 per share.

The terms of the fixed-rate promissory notes were amended and restated on August 31, 2022 to include a conversion feature that gives each lender the right at any time, including upon notice of prepayment, at its sole option, to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share.

Additionally, the March 31, 2023 $30.0 million promissory note and accrued interest may be converted in whole at the option of the noteholder following the Conversion Price Date, which is the trading day prior to the opening of the next open trading window, as determined by the company’s board of directors in accordance with the company’s Insider Trading Policy.

The conversion price is equal to the greater of (i) the NASDAQ Official Closing Price and (ii) the consolidated closing bid price of the company’s common stock on the Conversion Price Date.

There is no floor on the conversion price for this convertible note, therefore, as of March 31, 2023 we cannot determine the total number of shares issuable upon conversion that may occur in the future.

The terms of the fixed-rate promissory notes were amended and restated on August 31, 2022 to include a conversion feature that gives each lender the right at any time, at its sole option (other than when the lender is in receipt of a written notice of prepayment from the borrower), the right to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share.

Upon receipt of a written notice of prepayment from the borrower, the lender has the right, at its option, to convert the outstanding principal amount to be prepaid and the accrued and unpaid interest thereon (as specified in the notice of prepayment) into shares of the company’s common stock at a price of $5.67 per share.

The conversion of some or all of the aforementioned promissory notes, to the extent we deliver shares upon conversion, at a time when the company’s common stock is valued at greater than $5.67 per share would dilute the ownership interests of existing stockholders.

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Under this model, the company calculated a gain on extinguishment of $82.9 million, representing the difference between the fair value of the new and amended promissory notes and the carrying value of the extinguished debt, net of any unamortized related-party notes discounts plus the cash proceeds from the new promissory note.

Since the debt was obtained from entities under common control, such gain was recorded in additional paid-in capital, on the condensed consolidated statement of stockholders’ deficit for the three and nine months ended September 30, 2022.

Also, the difference between the principal and accrued interest outstanding as of the date of amendment and the fair value of the new and amended promissory notes was recorded as a debt discount to be amortized as interest expense over the remaining term (or until conversion).

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The company adopted this statement effective January 1, 2022.

The value of our warrants outstanding is subject to potentially material increases and decreases based on fluctuations in the price of our common stock, which may affect our results of operations and financial position and could adversely affect our stock price.

In December 2022, we completed a registered direct offering of 9,090,909 shares, raising approximately $47.0 million in net proceeds.

In connection with the sale of our common stock, we entered into a warrant agreement that allows the investor to purchase up to 9,090,909 shares at an exercise price of $6.60 per share.

The warrants are immediately exercisable and expire two years after the initial issuance date.

In February 2023, we completed a registered direct offering of 14,072,615 shares, raising approximately $47.0 million in net proceeds.

In connection with the sale of our common stock, we entered into a warrant agreement that allows the investors to purchase up to 14,072,615 shares at an exercise price of $4.26 per share.

The warrants are immediately exercisable and expire two years after the initial issuance date.

We account for the warrants as a derivative instrument, and changes in the fair value of the warrants are included in other income (expense), net , on the condensed consolidated statement of operations for each reporting period.

At March 31, 2023, the fair value of warrant liabilities included in the company’s condensed consolidated balance sheet was $17.8 million.

We used the Black-Scholes option pricing model to determine the fair value of the warrants.

As a result, the valuation of this derivative instrument is subjective, and the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and probability of a fundamental transaction (a strategic merger or sale).

Changes in these assumptions can materially affect the fair value estimate.

We could, at any point in time, ultimately incur amounts different than the carrying value, which could have a significant impact on our results of operations and financial position.

The fluctuations of warrant value and changes in the assumptions and factors used in the model may impact our operating results, making it difficult to forecast our operating results and making period-to-period comparisons less predictive of future performance.

In one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors.

In that event, the market price of our common stock could decline.

In addition, the market price of our common stock may fluctuate or decline regardless of our operating performance.

We are a clinical-stage biotechnology company with a limited operating history and no products approved for commercial sale.

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Because of the numerous risks and uncertainties associated with our product development efforts, we are unable to predict when we may become profitable, if at all.

Since the commencement of our operations, we have incurred significant losses each year, and, as of September 30, 2022 we had an accumulated deficit of $2.3 billion.

Since the commencement of our operations, we have incurred significant losses each year, and, as of March 31, 2023 we had an accumulated deficit of $2.5 billion.

We expect to continue to incur significant expenses as we seek to expand our business, including in connection with conducting research and development across multiple therapeutic areas, participating in clinical trial activities, continuing to acquire or in-license technologies, maintaining, protecting and expanding our intellectual property, seeking regulatory approvals, increasing our manufacturing capabilities and, upon successful receipt of FDA approval, commercializing our products.

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If we are required by the FDA or any equivalent foreign regulatory authority to perform clinical trials or studies in addition to those we currently expect to conduct, or if there are any delays in completing the clinical trials of our product candidates, our expenses could increase substantially.

Although we have submitted a BLA for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, which was accepted by the FDA for review, setting a target PDUFA action date of May 23, 2023, we may not receive approval by the target PDUFA action date, if at all, for commercialization and even if approved, the resulting revenue may not enable us to achieve profitability.

We have submitted a BLA for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, which was accepted by the FDA for review with a target PDUFA action date of May 23, 2023.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in Part I, Item 2 “ Management’s Discussion and Analysis — Subsequent Events .

” It is unclear when the FDA will approve our BLA, if at all, for commercialization and even if approved, the resulting revenue may not enable us to achieve profitability.

Even if we obtain regulatory approval to market a product candidate, our future revenues will depend upon the size of any markets in which our product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets.

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As a result, it may be more difficult for you to assess our future viability than it could be if we had a longer operating history.

Our businesses may not be integrated successfully, or such integration may be more difficult, time consuming or costly than expected.

The combination of two businesses is complex, costly and time-consuming and may divert significant management attention and resources to combining our prior businesses.

This process may disrupt our businesses.

The failure to meet the challenges involved in combining the two businesses and to realize the anticipated benefits of the Merger could cause an interruption of, or a loss of momentum in, the activities of the combined company and could adversely affect the results of operations of the combined company.

Our ability to realize the anticipated benefits of the Merger will depend, to a large extent, on our ability to integrate our businesses in a manner that facilitates growth opportunities and achieves the projected synergies identified by each company without adversely affecting current revenues and investments in future growth.

The overall combination of our businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customer and other business relationships.

Many of these factors are outside of our control, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact the business, financial condition and results of operations of the combined company.

In addition, a decline in the market price of the combined company’s common stock could adversely affect the company’s ability to issue additional securities and to obtain additional financing in the future.

We invest our cash on hand in various financial instruments which are subject to risks that could adversely affect our business, results of operations, liquidity and financial condition.

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Our ability to use NOLs and research and development credits to offset future taxable income may be subject to certain limitations.

In general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs or credits, to offset future taxable income or taxes.

For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest

ownership percentage within a specified testing period.

In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs or credits, to offset future taxable income or taxes.

We have not conducted a complete study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study.

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If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.

We believe that our financial statements reflect adequate reserves to cover such a contingency, but there can be no assurances in that regard.

We believe that our consolidated financial statements reflect adequate reserves to cover such a contingency, but there can be no assurances in that regard.

Risks Related to the Discovery, Development and Commercialization of our Product Candidates

We will be substantially dependent on the success of our product candidates and cannot guarantee that these product candidates will successfully complete development, receive regulatory approval or be successfully commercialized.

From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, and the sale of our bioreactors and related consumables.

From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables, and grant programs.

We have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

I n May 2022, we announced the submission of a BLA to the FDA for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease.

In July 2022, we announced the FDA has accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

It is unclear when the FDA will approve our BLA, if at all.

In July 2022, we announced that the FDA had accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events .” It is unclear when the FDA will approve our BLA, if at all.

We have invested a significant portion of our efforts and financial resources in the development of our main product candidates, N-803, our novel antibody cytokine fusion protein , saRNA and second-generation hAd5 vaccine candidates, and aldoxorubicin, some of which are used in combination with our NK cell therapy candidates.

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Clinical trial delays could shorten any periods during which our product candidates have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

In addition, we have in the past experienced clinical holds imposed upon certain of our or investigator-initiated clinical trials for various reasons, and we may experience further clinical trial holds in the future.

In addition, we have in the past experienced clinical holds imposed upon certain of our or investigator-led clinical trials for various reasons, and we may experience further clinical trial holds in the future.

If we fail to commence or complete, or experience delays in, any of our planned clinical trials, our stock price and our ability to conduct our business as currently planned could be harmed.

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• receive regulatory approval for the targeted patient population(s) and claims that are necessary or desirable for successful marketing;

• manufacture product candidates through contract manufacturing organizations (CMOs) or in our own, or our affiliates’, manufacturing facilities in sufficient quantities and at acceptable quality and manufacturing cost to meet commercial demand at launch and thereafter;

• manufacture product candidates through CMOs or in our own, or our affiliates’, manufacturing facilities in sufficient quantities and at acceptable quality and manufacturing cost to meet commercial demand at launch and thereafter;

• establish and maintain agreements with wholesalers, distributors, pharmacies, and group purchasing organizations on commercially reasonable terms;

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• following launch, assure that our product will be used as directed and that additional unexpected safety risks will not arise.

In July 2022, we announced the FDA has accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

It is unclear when the FDA will approve our BLA, if at all.

Even if the FDA approves N-803 for certain indications or in combination with other therapeutic products, and even if we obtain significant market share for it, because the potential target population may be small, we may never achieve profitability without obtaining regulatory approval for additional indications.

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Additionally, we may not be able to obtain the labeling claims necessary or desirable for the promotion of our product candidates

In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million contingent upon successful approval of a BLA, or foreign equivalent, for N-803 by December 31, 2022 and approximately $304.0 million contingent upon calendar-year worldwide net sales of N-803 exceeding $1.0 billion prior to December 31, 2026 (with amounts payable in cash or shares of our common stock or a combination thereof).

Soon-Shiong and his related party hold approximately $279.5 million in the aggregate of CVRs and they have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

We may be required to pay the other prior Altor stockholders up to $164.2 million in settlement of the CVRs relating to the regulatory milestone and up to $164.2 million of the CVRs relating to the sales milestone should they choose to have the CVRs paid in cash instead of common stock.

In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million of contingent consideration upon the successful regulatory approval of a BLA by the FDA, or foreign equivalent, for N-803 by December 31, 2022, and approximately $304.0 million of contingent consideration upon calendar-year worldwide net sales of N-803 exceeding $1.0 billion prior to December 31, 2026 with amounts payable in cash or shares of our common stock or a combination thereof.

With respect to the regulatory milestone CVR agreement, in May 2022 we announced the submission of a BLA to the FDA for our product candidate, Anktiva (N-803) in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease.

In July 2022 we announced that the FDA had accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events .” It is unclear when the FDA will approve our BLA, if at all.

The FDA did not approve our BLA on or before December 31, 2022, and therefore the regulatory milestone was not met, and the regulatory milestone CVR agreement terminated in accordance with its terms.

With respect to the net sales milestone CVR agreement, as of December 31, 2022, Dr.

Soon-Shiong and his related party hold approximately $139.8 million of net sales CVRs and they have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

We may be required to pay the other prior Altor stockholders up to $164.2 million for their net sales CVRs should they choose to have their CVRs paid in cash instead of common stock.

If this were to occur, we may need to seek additional sources of capital, and we may not be able to achieve profitability or positive cash flow.

We have submitted the BLA, and in July 2022, we announced the FDA had accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

It is unclear when the FDA will approve our BLA, if at all.

If the FDA does not approve our BLA by December 31, 2022, prior to its established target PDUFA action date, the $304.0 million related to the regulatory milestone will not be payable and the holders of these CVRs will not receive any cash or shares of our common stock on account of the regulatory milestone CVRs.

We plan to collaborate with governmental, academic and corporate partners, including affiliates, to improve and develop N-803, hAd5 and other therapies for new indications for use in combination with other therapies and to improve and develop other product candidates, which may expose us to additional risks, or we may not realize the benefits of such collaborations.

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Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions.

Currently, our product candidates are manufactured using processes developed or modified by us, our affiliates or by our third-party research institution collaborators that we may not utilize for more advanced clinical trials or commercialization.

Currently, our product candidates are manufactured using processes developed or modified by us, our affiliates or by our third-party collaborators that we may not utilize for more advanced clinical trials or commercialization.

Currently we manufacture our product candidates or we may use third-party CMOs or some of our related parties to manufacture our product candidates.

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The commercial terms of any new arrangement could be less favorable than our existing arrangements and the expenses relating to the transfer of necessary technology and processes could be significant.

Our failure to comply or our CMOs’ failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

Our failure to comply or our CMOs’ failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory review process.

We may not be able to demonstrate sufficient comparability between products manufactured at different facilities to allow for inclusion of the clinical results from patients treated with products from these different facilities, in our product registrations.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

The letter indicated that the FDA had determined that it cannot approve the BLA in its present form, and the FDA had made recommendations to address the issues raised.

The deficiencies relate to the FDA’s pre-license inspection of the company’s third-party contract manufacturing organizations.

Satisfactory resolution of the observations noted at the pre-license inspection is required before the BLA may be approved.

See Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

We also are required to register certain clinical trials and post the results of certain completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes.

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Manufacturers are also subject to continuing FDA and other regulatory authority inspections following marketing approval.

Further, we and our third-party CMOs must supply all necessary Chemistry, Manufacturing and Controls (CMC) documentation in support of a BLA or NDA on a timely basis.

Further, we and our third-party CMOs must supply all necessary CMC documentation in support of a BLA or NDA on a timely basis.

Our or our CMOs’ manufacturing facilities may be unable to comply with our specifications, cGMP, and with other FDA, state, and foreign regulatory requirements, and there is no guarantee that we or our CMOs will be able to successfully pass all aspects of a pre-approval inspection by the FDA or other foreign regulatory authorities.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

The letter indicated that the FDA had determined that it cannot approve the BLA in its present form, and the FDA had made recommendations to address the issues raised.

The deficiencies relate to the FDA’s pre-license inspection of the company’s third-party contract manufacturing organizations.

Satisfactory resolution of the observations noted at the pre-license inspection is required before the BLA may be approved.

See Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

” We may be unable to resolve the items outlined in the complete response letter in a timely manner, if at all, which could have a material impact on our results of operations, financial condition, and business.

Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of product candidates that may not be detectable in final product testing.

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The FDA may also require that we conduct additional post-marketing studies or implement risk management programs, such as REMS, until more experience with our product candidates is obtained.

Finally, after increased usage, we may find that our product candidates do not have the intended effect, do not work with other combination therapies or have unanticipated side

effects, potentially jeopardizing initial or continuing regulatory approval and commercial prospects.

Finally, after increased usage, we may find that our product candidates do not have the intended effect, do not work with other combination therapies or have unanticipated side effects, potentially jeopardizing initial or continuing regulatory approval and commercial prospects.

More restrictive government regulations or negative public opinion could have an adverse effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop.

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To achieve commercial success for the product candidates, which we may license to others, we will rely on the assistance and guidance of those collaborators.

For product candidates for which we retain commercialization rights and marketing approval, if approved, in order to commercialize our product candidates, we must continue to build out our marketing, sales and distribution capabilities, including a comprehensive healthcare compliance program, or arrange with third parties to perform these services, which will take time and require significant financial

expenditures and could delay any product launch and we may not be successful in doing so.

There are significant risks involved with building and managing a commercial infrastructure.

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Despite the implementation of security measures, our internal computer systems and those of our CROs, CMOs, clinical sites and other contractors and consultants are vulnerable to failure or damage from computer viruses and other malware, employee error, unauthorized and authorized access or other cybersecurity attacks, natural disasters, terrorism, war, fire and telecommunication and electrical failures.

As the cyber-threat landscape evolves, these cyberattacks are increasing in their frequency, sophistication and intensity and are becoming increasingly difficult to detect.

The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies.

As the cyberthreat landscape evolves, these cyberattacks are increasing in their frequency, sophistication and intensity and are becoming increasingly difficult to detect.

The techniques used by cybercriminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies.

Cyberattacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability.

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We may also need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us.

We also anticipate that part of our strategy for pursuing the wide range of indications potentially addressed by N-803 will involve further investigator-initiated clinical trials.

We also anticipate that part of our strategy for pursuing the wide range of indications potentially addressed by N-803 will involve further investigator-led clinical trials.

While these trials generally provide us with valuable clinical data that can inform our future development strategy, we generally have less control over not only the conduct but also the design of these clinical trials.

Third-party investigators may design clinical trials involving our product candidates with clinical endpoints that are more difficult to achieve or in other ways that increase the risk of negative clinical trial results compared to clinical trials we may design on our own.

Negative results from investigator-initiated clinical trials, regardless of how the clinical trial was designed or conducted, could have a material adverse effect on our business and the perception of our product candidates.

Negative results from investigator-led clinical trials, regardless of how the clinical trial was designed or conducted, could have a material adverse effect on our business and the perception of our product candidates.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services.

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Any failure by our third-party manufacturers to comply with cGMP or maintain a compliance status acceptable to the FDA or other regulatory authorities or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

The letter indicated that the FDA had determined that it cannot approve the BLA in its present form, and the FDA made recommendations to address the issues raised.

The deficiencies relate to the FDA’s pre-license inspection of the company’s third-party contract manufacturing organizations.

Satisfactory resolution of the observations noted at the pre-license inspection is required before the BLA may be approved.

See Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

” In addition, our third-party manufacturers will be subject to periodic inspections by the FDA and other regulatory authorities, and failure to comply with cGMP could be the basis for the FDA to issue a warning or untitled letter, withdraw approvals for product candidates previously granted to us, or take other regulatory or legal action, including a request to recall or seize product candidates, total or partial suspension of production, suspension of clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of product candidates, injunction, imposing civil penalties or pursuing criminal prosecution.

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In addition, quality issues may arise during scale-up and validation of commercial manufacturing processes.

Any issues in our manufacturing process could result in increased scrutiny by regulatory authorities, delays in our regulatory approval process, increases in our operating expenses, or failure to obtain or maintain approval for our product candidates.

Any issues in our manufacturing process could result in increased scrutiny by regulatory authorities, delays in our regulatory review process, increases in our operating expenses, or failure to obtain or maintain approval for our product candidates.

If such issues relate to an approved product, we may not be able to commercialize the approved product as we planned or fail to meet commercial demand, any of which can materially and adversely affect our position in the market.

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For example, in 2019, Sorrento Therapeutics, Inc.

with which we jointly established a new entity called Immunotherapy NANTibody, LLC as a stand-alone biotechnology company, commenced litigation against us and certain of our officers and directors, alleging that we improperly caused NANTibody to acquire IgDraSol, Inc.

and in 2020, Sorrento sent letters purporting to terminate an exclusive license agreement with us and an exclusive license agreement with NANTibody.

Additionally, in 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration, served by Shenzhen Beike Biotechnology Co.

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and (viii) it may be difficult for us to exit if an impasse arises or if we desire to sell our interest for any reason.

For example, we have established a joint venture relationship with Amyris, and there can be no guarantee that it will be successful.

In addition, we may, in certain circumstances, be liable for the actions of our partners.

Any of the foregoing risks could have a material adverse effect on our business, financial condition and results of operations.

For example, we are in the initial stages of establishing a joint venture relationship with Amyris, and there can be no guarantee that it will be successful.

We will be heavily dependent on our senior management, particularly Dr.

We are heavily dependent on our senior management, particularly Dr.

Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, and a loss of a member of our senior management team in the future, even if only temporary, could harm our business.

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Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

We may become involved in securities litigation or stockholder derivative litigation in connection with our recent Merger, and this could divert the attention of our management and harm our business, and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction.

We were involved in this type of litigation in connection with our recent Merger, and we may become involved in this type of litigation in the future.

Litigation often is expensive and diverts management’s attention and resources, which could adversely affect our business and the company.

A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.

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As part of the transaction, we assumed obligations under various third-party agreements, and committed to spend $1.52 billion on operational expenses during the initial term, and an additional $1.50 billion on operational expenses if we elect to renew the lease for the additional 10-year term.

We also committed to hiring 450 employees at the Dunkirk Facility within the first 5 years of operations, with 300 such employees to be hired within the first 2.5 years of operation.

We also committed to hiring 450 employees at the Dunkirk Facility within the first five years of operations, with 300 such employees to be hired within the first 2.5 years of operation.

We are eligible for certain sales-tax exemption savings during the development of the Dunkirk Facility, and certain property tax savings over the next 20 years, subject to certain terms and conditions, including performance of certain of the obligations described above.

In addition, we believe that the Dunkirk Facility has construction needs that may require approximately 12 to 18 months to complete in order for it to be used as intended.

Consequently, during the third quarter of 2022, we determined to conduct a reduction-in-force of a significant portion of the then-current employees at the Dunkirk Facility effective in late December 2022.

Consequently, during the third quarter of 2022, we determined to conduct a reduction-in-force of a significant portion of the then-current employees at the Dunkirk Facility, which became effective in late December 2022.

The construction period and reduction-in-force may adversely affect our ability to satisfy certain operational obligations described above.

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We believe we are entitled to defense costs and indemnification and, accordingly, we have provided notice to Athenex.

In April 2023, Athenex announced that it had appointed a Chief Restructuring Officer to support Athenex’s ongoing review of strategic alternatives.

We further believe Exyte’s claims against us are without merit, and we intend to defend the claims vigorously.

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Public-private partnerships are also subject to risks associated with government and government agency counterparties, including risks related to government relations compliance, sovereign immunity, shifts in the political environment, changing economic and legal conditions and social dynamics.

Our contractors and subcontractors may place liens on our projects, and if they then successfully foreclose on such projects, we may not be able to use such assets for our business.

Under general property law, any contractor or subcontractor doing work on a project may attach a lien on the property with respect to which it does work to secure the dollar value of all labor and material furnished to the project.

A valid lien holder could, after the lien is perfected, institute a collection suit, according to the lien, and if it were successful in obtaining a judgment, the real property and the equipment thereon could be foreclosed upon.

If a contractor were to successfully foreclose on such liens, we may not then be able to use such assets to manufacture our products, and our business could be materially harmed.

For example, certain contractors have recently recorded liens related to tenant improvements that we have contracted to have installed at one of our leased properties.

Risks Related to Healthcare and Other Government Regulations

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Our product candidates are subject to extensive governmental regulations relating to, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of drugs and therapeutic biologics.

Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required to be successfully completed in the U.S.

Rigorous preclinical testing and clinical trials and an extensive regulatory review process are required to be successfully completed in the U.S.

and in many foreign jurisdictions before a new drug or therapeutic biologic can be marketed.

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In July 2022, we announced the FDA has accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in Part I, Item 2 “ Management’s Discussion and Analysis — Subsequent Events.

” It is unclear when the FDA will approve our BLA, if at all.

If the FDA requires additional data, finds that the CMC information in the BLA is deficient, disagrees with our interpretation or analysis of clinical data, identifies any deficiency in our clinical data, or finds deficiencies in our pre-approval inspection, we may fail to obtain approval of the BLA for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, or approval may be delayed.

The letter referenced above noted deficiencies related to the FDA’s pre-license inspection of the company’s third-party contract manufacturing organizations.

Satisfactory resolution of the observations noted at the pre-license inspection is required before the BLA may be approved.

The FDA further provided recommendations specific to additional CMC issues and assays to be resolved.

We have not submitted any other marketing or drug approval applications to the FDA or comparable foreign authorities, for any other product candidate, and we may never receive such regulatory approval for any of our product candidates or regulatory approval that will allow us to successfully commercialize our product candidates.

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Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, however a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others.

Approval policies, procedures and requirements may vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the U.S., including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.

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Although the law includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of personal information depending on the context.

Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in November 2020 and goes into effect in most material respects on January 1, 2023.

Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in November 2020 and went into effect in most material respects on January 1, 2023.

The CPRA significantly modified the CCPA, which may require us to modify our practices and policies and may further increase our compliance costs and potential liability.

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Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business.

In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes.

The impact of these legislative, executive, and administrative actions and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is unclear.

Cost control initiatives could cause us, or our collaborators, to decrease, discount, or rebate a portion of the price we, or they, might establish for products, which could result in lower than anticipated product revenues.

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and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our product candidates profitably.

These changes included aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2030, with the exception of a temporary suspension implemented under various COVID‑19 relief legislation from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

These changes included aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2031, with the exception of a temporary suspension implemented under various COVID‑19 relief legislation from May 1, 2020 through March 31, 2022.

Under current legislation, the actual reduction in Medicare payments can vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

In January 2013, the American Taxpayer Relief Act of 2012 (ATRA) was approved which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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with respect to drug pricing practices, including Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

At the federal level, in 2020, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives, some of which resulted in lawsuits against the U.S.

Department of Health and Human Services challenging various aspects of the rules.

The impact of these lawsuits as well as legislative, executive, and administrative actions of the Biden administration on us and the pharmaceutical industry as a whole remains unclear.

As discussed above, in August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

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We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our current product candidates and any future product candidates or additional pricing pressures.

It is possible that additional governmental action is taken to address the COVID-19 pandemic.

Governments outside the U.S.

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federal false claims and civil monetary penalties laws, including the federal civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting or causing to be presented, claims for payment by government funded programs such as Medicare or Medicaid that are false or fraudulent, and which may apply to us by virtue of statements and representations made to customers or third parties;

federal Health Insurance Portability and Accountability Act (HIPAA), which created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud healthcare programs;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), which imposes requirements on certain types of people and entities relating to the privacy, security, and transmission of individually identifiable PHI, and requires notification to affected individuals and regulatory authorities of certain breaches of security of PHI;

• HIPAA, which created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud healthcare programs;

• HIPAA, as amended by HITECH, which imposes requirements on certain types of people and entities relating to the privacy, security, and transmission of individually identifiable PHI, and requires notification to affected individuals and regulatory authorities of certain breaches of security of PHI;

• the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, to report annually to the Centers for Medicare & Medicaid Services (CMS) information related to payments and other transfers of value to covered recipients, including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare providers (such as physician assistants and nurse practitioners) and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members, which is published in a searchable form on an annual basis;

• federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making, or causing to be made, false statements relating to healthcare matters;

• the federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier;

• the FCPA, the U.K.

Bribery Act of 2010, and other local anti-corruption laws that apply to our international activities;

• state laws comparable to each of the above federal laws, such as, for example, anti-kickback and false claims laws that may be broader in scope and also apply to commercial insurers and other non-federal payors, requirements for mandatory corporate regulatory compliance programs, and laws relating to patient data privacy and security.

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Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our N-803, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates and technologies.

For example, one of our European patents, EP 3601363, has recently been opposed by a third party.

We intend to defend our patent and believe we have meritorious defenses against this opposition.

An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned or in‑licensed patent rights, allow third parties to commercialize our N-803, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates or technologies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

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Such a loss of patent protection could have a material adverse impact on our business, financial condition, results of operations and prospects.

One of our European patents, EP3601363, has recently been opposed by a third party.

We intend to defend our patent and believe we have meritorious defenses against this opposition.

The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial.

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Our rights to develop and commercialize our product candidates and technologies are subject, in part, to the terms and conditions of licenses granted to us by others.

We will rely on licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of aldoxorubicin as well as products enabled by our adenoviral and yeast, including Tarmogen, vaccine technologies.

License agreements may not provide exclusive rights to use certain licensed intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and product candidates in the future.

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We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all.

assurance can be given that we will be successful in licensing any additional rights or technologies from third parties and/or our affiliates.

No assurance can be given that we will be successful in licensing any additional rights or technologies from third parties and/or our affiliates.

Our inability to license the rights and technologies that we have identified, or that we may in the future identify, could have a material adverse impact on our ability to complete the development of our product candidates or to develop additional product candidates.

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Soon-Shiong, through his direct and indirect ownership of the company’s common stock, has voting control of the company.

As of September 30, 2022, Dr.

As of March 31, 2023, Dr.

Soon-Shiong and his affiliates own approximately 74.2% of the company’s common stock outstanding.

Additionally, an affiliate of Dr.

As of March 31, 2023, the company has a $300.0 million promissory note with an entity affiliated with Dr.

Soon-Shiong that is due and payable on December 31, 2023.

In the event of a default on the loan (as defined in the promissory note), including if the company does not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at price of $5.67 per share.

The conversion price is equal to the greater of (i) the NASDAQ Official Closing Price and (ii) the consolidated closing bid price of the company’s common stock on the Conversion Price Date.

Furthermore, entities affiliated with Dr.

Soon-Shiong hold fixed-rate promissory notes representing $264.9 million in indebtedness (including principal and accrued and unpaid interest) as of March 31, 2023.

The terms of these fixed-rate promissory notes were amended and restated to include a conversion feature that gives each lender, at its sole option, at any time (other than when the lender is in receipt of a written notice of prepayment from the borrower), the right to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share.

An affiliate of Dr.

Soon-Shiong holds a warrant to purchase 1,638,000 shares of the company’s common stock that will become exercisable if certain performance conditions are satisfied.

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Soon-Shiong and his related party have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

As of September 30, 2022, the company has a $300.0 million promissory note with an entity affiliated with Dr.

Soon-Shiong that is due and payable on December 31, 2023.

In addition, entities affiliated with Dr.

Soon-Shiong hold fixed-rate promissory notes representing $315.7 million in indebtedness (including principal and accrued and unpaid interest) as of September 30, 2022.

These notes include a conversion feature that gives each lender the right at any time, including upon notice of prepayment, at its sole option, to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share.

Soon-Shiong also has a total of 1,626,064 stock options outstanding as of September 30, 2022, of which 926,064 are exercisable and 700,000 are unvested and unexercisable.

Soon-Shiong also has a total of 1,626,064 stock options outstanding as of March 31, 2023, of which 1,159,398 are exercisable and 466,666 are unvested and unexercisable.

Soon-Shiong is in a position to control the outcome of corporate actions that require, or may be accomplished by, stockholder approval, including amending the bylaws of the company, the election or removal of directors and transactions involving a change of control.

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Sales of a substantial number of shares of our common stock in the public market could occur at any time.

If our stockholders sell, or the market perceives that our stockholders intend to sell substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly.

If our stockholders sell, or the market perceives that our stockholders intend to sell substantial amounts of our common stock in the public market, including shares obtained from the exercise of our warrants, the market price of our common stock could decline significantly.

In addition, our Executive Chairman and Global Chief Scientific and Medical Officer, Dr.

Soon-Shiong, and his affiliates currently own approximately 78.3% of our outstanding shares of common stock as of September 30, 2022.

Soon-Shiong, and his affiliates currently own approximately 74.2% of our outstanding shares of common stock as of March 31, 2023.

Sales of stock by Dr.

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In addition, we expect that additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company.

To raise capital, we may sell common stock, including as part of the ATM, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time.

If we sell common stock, including through the ATM, convertible securities or other equity securities, investors may be materially diluted and new investors could gain rights, preferences and privileges senior to the holders of our common stock.

To raise capital, we may sell common stock, convertible securities or other equity securities (including warrants) in one or more transactions at prices and in a manner we determine from time to time.

If we sell common stock, convertible securities or other equity securities (including warrants), new investors could gain rights, preferences and privileges senior to the holders of our common stock.

The issuance of additional shares of common stock or warrants to purchase common stock, perception that such issuances may occur, or exercise of outstanding warrants or other equity securities will have a material dilutive impact on existing stockholders and could have a material negative effect on the market price of our common stock.

We have incurred and will continue to incur costs as a result of operating as a public company and our management has been and will be required to devote substantial time to compliance initiatives and corporate governance practices, including maintaining an effective system of internal control over financial reporting.

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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our common stock will depend on the research and reports that securities or industry analysts publish about us or our business.

The trading market for our common stock and the value of our warrants will depend on the research and reports that securities or industry analysts publish about us or our business.

We do not have any control over these analysts.

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If one or more of these analysts’ cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

The holders of our CVRs payable and contingent upon us obtaining FDA approval of our BLA by December 31, 2022 may not receive any further consideration.

In connection with the 2017 acquisition of Altor, we issued, in part, CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million contingent upon successful approval of the BLA, or foreign equivalent, for N-803 by December 31, 2022.

We have submitted the BLA, and in July 2022, we announced the FDA had accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

Holders of our CVRs that are payable contingent upon us achieving certain milestones may not receive any further consideration.

In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million of contingent consideration upon the successful regulatory approval of a BLA by the FDA, or foreign equivalent, for N-803 by December 31, 2022, and approximately $304.0 million of contingent consideration upon calendar-year worldwide sales of N-803 exceeding $1.0 billion prior to December 31, 2026.

I n July 2022 we announced that the FDA had accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

” It is unclear when the FDA will approve our BLA, if at all.

The FDA did not approve our BLA on or before December 31, 2022, and therefore the regulatory milestone was not met, and the regulatory milestone CVR agreement terminated in accordance with its terms.

With respect to the sales milestone CVR agreement, N-803 is not currently approved for commercial sale, and there can be no assurance that such sales milestone will be achieved.

Accordingly, holders of our CVRs that are payable contingent upon us achieving the aforementioned milestones may not receive any further consideration.

We are not subject to the provisions of Section 203 of the Delaware General Corporation Law (DGCL), which could negatively affect your investment.

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An “interested stockholder” is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more of the corporation’s voting stock.

Our decision not to be subject to Section 203 will allow, for example, our Executive Chairman and Global Chief Scientific and Medical Officer (who, with members of his immediate family and entities affiliated with him, currently own, in the aggregate, approximately 78.3% of our common stock as of September 30, 2022) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203.

Our decision not to be subject to Section 203 will allow, for example, our Executive Chairman and Global Chief Scientific and Medical Officer (who, with members of his immediate family and entities affiliated with him, currently own, in the aggregate, approximately 74.2% of our common stock as of March 31, 2023) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203.

This may make us more vulnerable to takeovers that are completed without the approval of our Board of Directors and/or without giving us the ability to prohibit or delay such takeovers as effectively.

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To the extent that a claim for indemnification is brought by any of our directors or officers, it would reduce the amount of funds available for use in our business.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a) Recent Sales of Unregistered Securities

(b) Issuer Purchases of Equity Securities

DEFAULTS UPON SENIOR SECURITIES.

MINE SAFETY DISCLOSURES.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors